The Indian steel industry is facing a complex challenge as the government considers increasing import duties on steel to protect domestic manufacturers from cheaper foreign steel, particularly from China and countries with free trade agreements. Pankaj Chadha, Chairman of the Egineering Export Promotion Council of India, recently voiced strong concerns about the potential impact of such policy changes on the country’s millions of small businesses. According to Chadha, while the balance sheets of large steel manufacturers in India remain strong, the financial health of around 8 lakh Micro, Small, and Medium Enterprises is in a precarious state, and any rise in duties would add to their burdens.
Chadha’s comments come in the wake of reports suggesting that India’s Ministry of Steel is considering a 25% hike in import duties on steel products as a measure to safeguard domestic producers. The move aims to protect the steel sector from cheap imports flooding the Indian market, particularly from countries like China, which have been accused of "dumping" steel at low prices. However, Chadha warns that such a policy could have severe consequences for the MSME sector, which relies heavily on steel for manufacturing a variety of products. MSMEs, which make up the backbone of India’s industrial landscape, already face numerous challenges, including high input costs, access to financing, and regulatory hurdles.
Chadha stressed that the government’s consultations on this matter have so far excluded the voices of MSMEs, even though they constitute a significant part of India’s steel-consuming industries. He argued that the protection of steel producers should not come at the expense of MSMEs, which are integral to the nation’s economy and exports. "If protection is being provided for steel producers, there must also be protection for MSMEs. You cannot have a situation where producers are safeguarded while the 8 lakh MSMEs are left without support," he stated.
The EEPC Chairman further pointed out that a significant portion of the council’s export value comes from MSME members. According to Chadha, 50% of EEPC’s export value is contributed by MSMEs, and about 60% of its members are MSMEs. These small enterprises, which form the backbone of India's industrial sector, would struggle to compete if they were subjected to higher costs due to increased steel import duties. He questioned how MSMEs would be able to compete with international players if the government did not take steps to protect them from such policy changes.
Adding to the pressure on MSMEs, Chadha also highlighted the logistical challenges currently affecting the steel sector. He noted that Japanese steel shipments are stuck at Indian ports due to delays in issuing no-objection certificates, which has resulted in stalled shipments for over three months. This situation not only affects the availability of critical steel imports but also disrupts the operations of MSMEs that rely on these supplies to meet demand. The lack of access to necessary materials further exacerbates the difficulties faced by smaller businesses in the country.
A recent report by the Global Trade Research Initiative (GTRI) offers a different perspective on India’s steel imports. The report claims that India’s steel imports are “neither excessive nor unwarranted” and that half of these imports are critical raw materials necessary for domestic production. Furthermore, 40% of the imported steel consists of specialized items that India does not produce in sufficient quantities. Despite these facts, restrictive import policies continue to hinder the smooth functioning of the steel industry in India. The GTRI report emphasizes that the inefficiencies in the Ministry of Steel’s processes not only burden businesses but also risk reinforcing the difficulties faced by the broader Indian business environment.
The GTRI report calls for immediate, high-level intervention to streamline processes and address the bottlenecks that are hindering the growth of India’s steel sector. Such intervention, according to the report, could help ensure a more balanced and effective approach to protecting the interests of both large steel manufacturers and MSMEs. The report suggests that instead of blanket import restrictions, policies should focus on targeted measures that would help foster growth in the steel sector while also supporting the downstream industries that rely on steel products.
In conclusion, the debate over import duties on steel highlights the delicate balancing act the Indian government faces in protecting its steel industry without jeopardizing the interests of MSMEs. While larger steel manufacturers may benefit from such measures, the negative impact on small businesses cannot be ignored. For India’s economy to thrive, it is essential to ensure that policies foster growth across all sectors, providing both protection and opportunity for MSMEs, which are a critical driver of innovation, employment, and exports. As the discussions around steel imports continue, it is clear that a comprehensive, inclusive approach will be key to ensuring long-term economic stability.
